Malaysia’s overflowing inbox

Most of Malaysia’s ruling coalition will be pleased to see a busy year ahead with the federation increasingly taking centre stage as trade and financial hub, a string of international treaties to be coordinated and the threat of Islamic extremism to counter.

They will be hoping to consign political scandals firmly to 2015.

Earlier this month Malaysian attorney general Mohamed Apandi Ali announced that Najib Razak, the federation’s embattled prime minister, had been cleared of all corruption allegations linked to indebted state investment fund 1Malaysia Development Berhad (1MDB).

Apandi said almost US$700 million that was deposited into the leader’s accounts in 2013 were a Saudi royal donation.

The announcement brought to an end the scandal that had saddled the ruling Umno (United Malays National Organisation) and hampered economic performance for more than half a year. The still-popular Najib appears now secure in power to push forward with the reform package he promised when he took office.

In contrast to many nations, Malaysians are prepared to let fallible politicians remain in power if they can see economic progress ahead. Malaysia’s delicate demographic balance between the ethnic Malaya majority and large Chinese and Indian minorities make people wary of disrupting the status quo too vigorously.

Wong Chin Huat of the Penang Institute think tank said Malaysians were remarkably ready to forgive their politicians’ mistakes. Wong said: “The streets of Kuala Lumpur and provincial capitals are calm as if nothing has happened. In fact, Najib has a stronger grasp of his party. This is because Umno warlords do not know how to remove him without damaging the party state.”

He said Malaysians could not agree on what a post-Umno federation would look like.

“Some want the continuity of the NEP [New Economic Policy] paradigm and greater Islamisation while others want a more inclusive and open Malaysia,” he said. “Why should Umno allow the opposition to postpone their disagreement and not split them? Because there is no clear alternative to Najib within Umno and to Umno within the nation. Najib will be here to stay.”

And the prime minister has an extensive list of tasks that need his attention.

Initially there is the Economic Transformation Programme (ETP) and the Trans-Pacific Partnership (TPP), which need ratifying.

Political instability fuelled investor uncertainty, hampering what otherwise was sound economic growth. GDP growth last year fell to 4.7 per cent, below the level initially forecast. The ringgit dropped by 19 per cent although this boosted export competitiveness, especially in the electronics sector and palm oil. But the ringgit has risen 1.3 per cent against the US dollar since Apandi’s announcement.

Kuala Lumpur’s goal of attaining “high-income” status by 2020 is within the tropical nation’s grasp. Between 2009 and 2013 per capita income rose from US$7,277 to US$10,538. Najib’s economic reforms have contributed to this success, especially the minimum wage.

Najib could look to liberalise his economy, including trade and labour. As the third largest Asean economy, behind Indonesia and Thailand, Kuala Lumpur must be eyeing its northerly neighbour’s position, floundering under the incompetent rule of ill-trained generals.

Malaysia is aiming to model itself as an international commercial hub.

Last month’s launch of the Asean Economic Area, which is trying to tie the disparate, often hostile, group of Southeast Asian countries into a cohesive single market along the European model, would seem to provide the ideal opportunity for Malaysia to step into a new role. Its success will depend on the members’ willingness to allow a free movement of labour and goods and Malaysia should provide the lead in this.

Political scandals muted Kuala Lumpur’s calls for regional economic reform and now these policies should be pursued with vigour.

The TPP, now approved by the parliament, should allow Kuala Lumpur to become more attractive to foreign firms. The new intellectual property protections will help tempt IT companies to invest.

Kuala Lumpur cannot afford more scandals and it must provide its population with healthy economic growth if it wants to counter the threat of Islamic extremism.

While it sees itself as a bastion for a progressive, democratic interpretation of Islam, this will only remain plausible if the population feels it is heading in the right economic direction. Washington sees Najib’s Global Movement of Moderates policy as a model for other countries to follow.

The Islamist attacks on central Jakarta on January 14 suggest Isis is winning ground in the world’s largest Muslim population and similar challenges face Malaysia.

Its interior minister estimates that 50,000 Malaysians support Isis and around 100 have travelled to Syria and Iraq to join its bloody jihad.

Najib and US President Barack Obama have a close relationship and the pair last year oversaw the establishment of a regional digital counter-messaging centre in Malaysia.

Making it quite clear which camp Malaysia was in, Deputy Prime Minister Dr Ahmad Zahid Hamidi announced beside US Secretary of State John Kerry at its launch: “Previously, we used Interpol as the channel of information but now we will get it directly from the US or FBI. Our police can now take immediate action to prevent as well as curb problems related to terrorism activities.”

With a challenging 12 months ahead, Malaysia’s rulers will be hoping they are not the story.